To understand China, one must understand three things: 1. Its debt; 2. The Chinese mindset; and 3. The current dictator of China, Xi Jinping.
The Chinese Economic Miracle of the last 30 years was based on the accumulation of so much debt it is beyond Western comprehension. Today, annual Chinese government debt payments equal more than five times that of the U.S. The Five Big Chinese Banks, all owned by the Central Government, are so over-leveraged and opaque no one knows what holds them in the air. Ditto the Regional Banks, all owned by Regional Chinese Governments. Ditto the big manufacturing and tech companies; and so on until it hits the property market, whose leverage makes that of the U.S. in 2008 look like child’s play. It cannot last, and it will not.
Overall, Chinese economic growth has been falling for 15 years, the property market is collapsing like the house of debt cards it is, and the current government crackdown on the flamboyant rich is driving wealth out of the country.
Second: The Chinese Mindset
China has two mindsets: as a country and individually. As a country, except for the 150-year Western occupation ending in 1997, China stood supreme and unconquered for 3,000 years—something it expects to continue. It has the long view. Western occupation was a blip.
But at the individual level, it is the opposite. Despotic—usually gilded—rulers come and go, and as their whims shift, individuals are always subject to the government confiscating their money, businesses and, if they want, their lives—at any time. It cannot be trusted.
Only family can be trusted; nothing else has ever lasted.
So the prevailing philosophy is both twofold and simple: as a country, China has the long view; but for individuals, it is get yours now. Both eschew such quaint Western notions like “fair play” or “rule by law.” Such notions are for suckers. If some fool or country believes otherwise, take advantage of them immediately.
Third: Chairman Xi Jinping
Xi was born in 1953 of a prominent family. However, Mao’s 1966 Cultural Revolution destroyed his family (along with killing tens of millions of Chinese citizens). His father, formerly well regarded, was branded an enemy of the Revolution, his mother was forced to denounce his father, his sister died by “suicide,” and Xi ended up living in a “cave house,” thence arrested and forced to work in a camp digging ditches, then exiled to a tiny peasant village for seven years.
So he knew hardship from an early age and learned to hustle himself all the way into where he is now. At age 68, Xi Jinping is de facto Communist Party Chairman for life, and has emerged as the strongest Cult of Personality since Mao.
Xi intensely promotes the “Chinese Dream.” This incorporates returning all lands once owned by China, to China. For example, forcibly jamming Hong Kong back into the fold. Such “forcible jamming” also includes Taiwan; it is just a matter of when. That this brings China into potential armed conflict with the U.S. is—in the long run—not all that relevant.
A short column like this does not do China justice, but the summation is ominous:
- The Chinese economy is flailing—creating instability.
- The “get yours now” private Mindset means if you can get your money out of China, you are—creating more instability
- Xi’s “Chinese Dream” puts it into conflict with the U.S.—creating yet more instability.
None of this is good news.
Michael is a volunteer columnist for the Independent.View Our User Comment Policy